analysis of icici prudential
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A
Project Study Report
On
ANALYSIS OF ICICI PRUDENTIALLIFE INSURANCE
Submitted in partial fulfillment for the
Award of degree of
Master of Business Administration
Submitted by Submitted to
Miss Saloni Garg Miss Swati jain
PSOM 2ndYear
POORNIMA SCHOOL OF MANAGEMENT
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CERTIFICATE
This is to certify that MS. SALONI GARG of MBA fourth semester of POORNIMA
COLLEGE OF ENGINEERING, Jaipur, has completed her project report on the topic of
ICICI PRUDENTIAL LIFE INSURANCE under the supervision of MS. SWATI
JAIN, Faculty member, PSOM
To best of my knowledge the report is original and has not been copied or submitted
anywhere else. It is an independent work done by her.
MS. SWATI JAIN
Faculty, PSOM, Jaipur.
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ACKNOWLEDGEMENT
I express my sincere thanks to my project guides, Ms. SWATI JAIN, MS.
MAUSAMI BANDYOPADHAYAY (Faculty) Department of Management Studies,
Poornima College of Engineering, Jaipur and Mr. SACHIN JAIN for guiding me right
from the inception till the successful completion of the project. I sincerely acknowledge
him for extending their valuable guidance, support for literature, critical reviews of
project and the report and above all the moral support he had provided to me with all
stages of this project.
I would like to thank RAJASTHAN TECHINICAL UNIVERSITY for giving anopportunity to work on a valuable project.
I would also like to thank the supporting staff of Poornima school of management,
for their help and cooperation throughout our project.
Saloni garg
MBA 4th Sem.
(psom)
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PREFACE
This project report has been prepared as per the requirement of the syllabus of
MBA course structure under which the students are required to undertake real
life short term corporate study. The vision of this project study is to evaluate
which brand of detergent is prefer by customers at Jaipur city in Rajasthan.
Performing such study and surveying the market was a firsthand experience for
me. I was exposed to the professional set-up and faced the market, which was
really a great experience.
During project period, I had very touching experiences. When business is
involved, experiences counts a lot, as we know, experience are an instrument,
which leads towards success. We all know that working in market on the grass
route level has always been a pleasure.
Now I take this opportunity to present the project report and sincerely hope that it
will be as much knowledge enhancing to the readers as it was to use during the
fieldwork and the completion of the report.
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EXECUTIVE SUMMARY
ICICI PRUDENTIAL Life insurance is the oldest life insurance company in the
world. It is the largest insurer in the UK and is the 28th
largest company in theworld. In India, the company is marketing life insurance products and unit linked
investment plans. From my research at ICICI , I found that the company has a lot
of competition from other private insurers like HDFC, Aviva, Birla Sun Life and
Tata AIG. It also faces competition from LIC. To compete effectively ICICI
PRUDENTIAL could launch cheaper and more reasonable products with small
premiums and short policy terms (the number of years premium is to be paid).
The ideal premium would be between Rs. 5000 Rs. 25000 and an ideal policy
term would be 10 20 years.
ICICI must advertise regularly and create brand value for its products and
services. Most of its competitors like Aviva, HDFC, Max, Reliance and LIC use
television advertisements to promote their products. The Indian consumer has a
false perception about insurance they feel that it would not benefit them if they
do not live through the policy term. Nowadays however, most policies are unit
linked plans where a customer is benefited even if their death does not occur
during the policy term. This message should be conveyed to potential customers
so that they readily invest in insurance.
Family responsibilities and high returns are the two main reasons people invest
in insurance. Optimum returns of 16 20 % must be provided to consumers to
keep them interested in purchasing insurance.
TABLE OF CONTENTS
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1. Intoduction to the industry
2. Introduction to the organization
3. Research Methodology
3.1 Title of the study
3.2 Duration of the study
3.3 Objective of the study
3.4 Type of research3.5 Sample size
3.6 Scope of the study
3.7 Limitation of the study
4. Interpretation & analysis
5. Facts & findings
6. SWOT
7. Conclusion
8. Recommendation9. Appendix
10. Bibliography
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life insurance is the bridge which covers the economic gap
between the time a man dies & the time he should die
INTRODUCTION OF INDUSTRY
Insurance is a legal Contract that protects people from the financial costs those
results from loss of life, loss of health, lawsuits, or property damage. Insurance
provides a means for individuals & society to cope up with some of the risks
faced in every day life by every body. People purchase contracts of insurance,
called a Policy, from various insurance companies.
Insurance can be divided into three categories:
1) Life Insurance
2) General Insurance
3) Health Insurance
Life insurance is a contract for payment of a sum of money to the person assured
on the happening of the event insured against. Usually the contract provides for
the payment of an amount on the date of maturity or at specified intervals or at
unfortunate death. The contract also provides for payment of premium
periodically to the corporation by the assured.
General insurance includes many areas of insurance like marine, motor,
engineering, health, fire, etc. The contract provides for the payment of an amount
on the happening of some contingency. These types of contracts are annual in
nature.
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History of insurance
In some sense we can say that insurance appears simultaneously with the
appearance of human society. We know of two types of economies in human
societies: money economies (with markets, money, financial instruments and so
on) and non-money or natural economies (without money, markets, financial
instruments and so on). The second type is a more ancient form than the first. In
such an economy and community, we can see insurance in the form of people
helping each other. For example, if a house burns down, the members of the
community help build a new one. Should the same thing happen to one's
neighbour, the other neighbours must help. Otherwise, neighbours will not
receive help in the future. This type of insurance has survived to the present day
in some countries where modern money economy with its financial instruments is
not widespread (for example countries in the territory of the former Soviet Union).
Turning to insurance in the modern sense (i.e., insurance in a modern money
economy, in which insurance is part of the financial sphere), early methods of
transferring or distributing risk were practised by Chinese and Babylonian traders
as long ago as the 3rd and 2ndmillennia BC, respectively.[8]
Chinese merchantstravelling treacherous river rapids would redistribute their wares across many
vessels to limit the loss due to any single vessel's capsizing. The Babylonians
developed a system which was recorded in the famous Code of Hammurabi, c.
1750 BC, and practised by early Mediterranean sailing merchants. If a merchant
received a loan to fund his shipment, he would pay the lender an additional sum
in exchange for the lender's guarantee to cancel the loan should the shipment be
stolen.
Achaemenian monarchs of Ancient Persia were the first to insure their people
and made it official by registering the insuring process in governmental notary
offices. The insurance tradition was performed each year in Norouz (beginning of
the Iranian New Year); the heads of different ethnic groups as well as others
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willing to take part, presented gifts to the monarch. The most important gift was
presented during a special ceremony. When a gift was worth more than 10,000
Derrik (Achaemenian gold coin) the issue was registered in a special office. This
was advantageous to those who presented such special gifts. For others, the
presents were fairly assessed by the confidants of the court. Then the
assessment was registered in special offices.
The purpose of registering was that whenever the person who presented the gift
registered by the court was in trouble, the monarch and the court would help him.
Jahez, a historian and writer, writes in one of his books on ancient Iran:
"[W]henever the owner of the present is in trouble or wants to construct a
building, set up a feast, have his children married, etc. the one in charge of this in
the court would check the registration. If the registered amount exceeded 10,000
Derrik, he or she would receive an amount of twice as much.
A thousand years later, the inhabitants of Rhodes invented the concept of the
'general average'. Merchants whose goods were being shipped together would
pay a proportionally divided premium which would be used to reimburse any
merchant whose goods were jettisoned during storm or sinkage.
The Greeks and Romans introduced the origins of health and life insurance c.
600 AD when they organized guilds called "benevolent societies" which cared for
the families and paid funeral expenses of members upon death. Guilds in the
Middle Ages served a similar purpose. The Talmud deals with several aspects of
insuring goods. Before insurance was established in the late 17th century,
"friendly societies" existed in England, in which people donated amounts of
money to a general sum that could be used for emergencies.
Separate insurance contracts (i.e., insurance policies not bundled with loans or
other kinds of contracts) were invented in Genoa in the 14th century, as were
insurance pools backed by pledges of landed estates. These new insurance
contracts allowed insurance to be separated from investment, a separation of
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roles that first proved useful in marine insurance. Insurance became far more
sophisticated in post-RenaissanceEurope, and specialized varieties developed.
Toward the end of the seventeenth century, London's growing importance as acentre for trade increased demand for marine insurance. In the late 1680s,
Edward Lloyd opened a coffee house that became a popular haunt of ship
owners, merchants, and ships captains, and thereby a reliable source of the
latest shipping news. It became the meeting place for parties wishing to insure
cargoes and ships, and those willing to underwrite such ventures. Today, Lloyd's
of London remains the leading market (note that it is not an insurance company)
for marine and other specialist types of insurance, but it works rather differently
than the more familiar kinds of insurance.
Insurance as we know it today can be traced to the Great Fire of London, which
in 1666 devoured 13,200 houses. In the aftermath of this disaster, Nicholas
Barbon opened an office to insure buildings. In 1680, he established England's
first fire insurance company, "The Fire Office," to insure brick and frame homes.
The first insurance company in the United States underwrote fire insurance and
was formed in Charles Town (modern-day Charleston), South Carolina, in 1732.
Benjamin Franklin helped to popularize and make standard the practice of
insurance, particularly against fire in the form ofperpetual insurance. In 1752, he
founded the Philadelphia Contributionship for the Insurance of Houses from Loss
by Fire. Franklin's company was the first to make contributions toward fire
prevention. Not only did his company warn against certain fire hazards, it refused
to insure certain buildings where the risk of fire was too great, such as all wooden
houses. In the United States, regulation of the insurance industry is highly
Balkanized, with primary responsibility assumed by individual state insurance
departments. Whereas insurance markets have become centralized nationally
and internationally, state insurance commissioners operate individually, though at
times in concert through a national insurance commissioners' organization. In
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recent years, some have called for a dual state and federal regulatory system
(commonly referred to as the Optional federal charter (OFC)) for insurance
similar to that which oversees state banks and national banks.
FEATURES OF INDIAN INSURANCE INDUSTRY:
Low market penetration.
Ever-growing middle-class component in population.
Growth of consumer movement with an increasing demand for better
insurance products.
Inadequate application of information technology for business.
Adequate fillip from the Govt. in the form of tax incentives to the insured.
59% of the advisors are satisfied by the commission provided by the co. Those
who are not satisfied said that the commission provided is very low as compared
other players in the industry. Most of the advisors are satisfied by the working
conditions.
This need has become even more important due to steady disintegration of the
prevalent joint family system, and emergence of nuclear families. The need to
protect your familys ever growing needs is why you need Life Insurance.
Following are the reasons:
Lifestyle Maintenance.
Costs of Education.
Mortgage and Debt protection.
Hardships Protection.
Replacement of Income.
Retirement Expenses.
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Principles of insurance
Commercially insurable risks typically share seven common characteristics.
1. A large number of homogeneous exposure units. The vast
majority of insurance policies are provided for individual members of very
large classes. Automobile insurance, for example, covered about 175
million automobiles in the United States in 2004. [2] The existence of a large
number of homogeneous exposure units allows insurers to benefit from
the so-called law of large numbers, which in effect states that as the
number of exposure units increases, the actual results are increasingly
likely to become close to expected results. There are exceptions to this
criterion. Lloyd's of London is famous for insuring the life or health of
actors, actresses and sports figures. Satellite Launch insurance covers
events that are infrequent. Large commercial property policies may insure
exceptional properties for which there are no homogeneous exposure
units. Despite failing on this criterion, many exposures like these are
generally considered to be insurable.
2. Definite Loss. The event that gives rise to the loss that is subject to the
insured, at least in principle, take place at a known time, in a known place,
and from a known cause. The classic example is death of an insured
person on a life insurance policy. Fire, automobile accidents, and worker
injuries may all easily meet this criterion. Other types of losses may only
be definite in theory. Occupational disease, for instance, may involve
prolonged exposure to injurious conditions where no specific time, place
or cause is identifiable. Ideally, the time, place and cause of a loss shouldbe clear enough that a reasonable person, with sufficient information,
could objectively verify all three elements.
3. Accidental Loss. The event that constitutes the trigger of a claim
should be fortuitous, or at least outside the control of the beneficiary of the
insurance. The loss should be pure, in the sense that it results from an
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event for which there is only the opportunity for cost. Events that contain
speculative elements, such as ordinary business risks, are generally not
considered insurable.
4. Large Loss. The size of the loss must be meaningful from the
perspective of the insured. Insurance premiums need to cover both the
expected cost of losses, plus the cost of issuing and administering the
policy, adjusting losses, and supplying the capital needed to reasonably
assure that the insurer will be able to pay claims. For small losses these
latter costs may be several times the size of the expected cost of losses.
There is little point in paying such costs unless the protection offered has
real value to a buyer.5. Affordable Premium. If the likelihood of an insured event is so high,
or the cost of the event so large, that the resulting premium is large
relative to the amount of protection offered, it is not likely that anyone will
buy insurance, even if on offer. Further, as the accounting profession
formally recognizes in financial accounting standards, the premium cannot
be so large that there is not a reasonable chance of a significant loss to
the insurer. If there is no such chance of loss, the transaction may have
the form of insurance, but not the substance. (See the U.S. Financial
Accounting Standards Boardstandard number 113)
6. Calculable Loss. There are two elements that must be at least
estimable, if not formally calculable: the probability of loss, and the
attendant cost. Probability of loss is generally an empirical exercise, while
cost has more to do with the ability of a reasonable person in possession
of a copy of the insurance policy and a proof of loss associated with a
claim presented under that policy to make a reasonably definite and
objective evaluation of the amount of the loss recoverable as a result of
the claim.
7. Limited risk of catastrophically large losses. The essential risk
is often aggregation. If the same event can cause losses to numerous
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policyholders of the same insurer, the ability of that insurer to issue
policies becomes constrained, not by factors surrounding the individual
characteristics of a given policyholder, but by the factors surrounding the
sum of all policyholders so exposed. Typically, insurers prefer to limit their
exposure to a loss from a single event to some small portion of their
capital base, on the order of 5 percent. Where the loss can be aggregated,
or an individual policy could produce exceptionally large claims, the capital
constraint will restrict an insurer's appetite for additional policyholders. The
classic example is earthquake insurance, where the ability of an
underwriter to issue a new policy depends on the number and size of the
policies that it has already underwritten. Wind insurance in hurricanezones, particularly along coast lines, is another example of this
phenomenon. In extreme cases, the aggregation can affect the entire
industry, since the combined capital of insurers and reinsurers can be
small compared to the needs of potential policyholders in areas exposed
to aggregation risk. In commercial fire insurance it is possible to find single
properties whose total exposed value is well in excess of any individual
insurers capital constraint. Such properties are generally shared among
several insurers, or are insured by a single insurer who syndicates the risk
into the reinsurance market.
Types of insurance
Any risk that can be quantified can potentially be insured. Specific kinds of risk
that may give rise to claims are known as "perils". An insurance policy will set out
in detail which perils are covered by the policy and which are not. Below are
(non-exhaustive) lists of the many different types of insurance that exist. A single
policy may cover risks in one or more of the categories set out below. For
example, auto insurance would typically cover both property risk (covering the
risk of theft or damage to the car) and liability risk (covering legal claims from
causing an accident). A homeowner's insurance policy in the U.S. typically
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includes property insurance covering damage to the home and the owner's
belongings, liability insurance covering certain legal claims against the owner,
and even a small amount of coverage for medical expenses of guests who are
injured on the owner's property.
Business insurance can be any kind of insurance that protects businesses
against risks. Some principal subtypes of business insurance are (a) the various
kinds of professional liability insurance, also called professional indemnity
insurance, which are discussed below under that name; and (b) the business
owner's policy (BOP), which bundles into one policy many of the kinds of
coverage that a business owner needs, in a way analogous to how homeowners
insurance bundles the coverages that a homeowner needs.[9]
Auto insurance
Auto insurance protects you against financial loss if you have an accident. It is a
contract between you and the insurance company. You agree to pay the
premium and the insurance company agrees to pay your losses as defined in
your policy. Auto insurance provides property, liability and medical coverage:
1. Property coverage pays for damage to or theft of your car.
2. Liability coverage pays for your legal responsibility to others for bodily
injury or property damage.
3. Medical coverage pays for the cost of treating injuries, rehabilitation and
sometimes lost wages and funeral expenses.
An auto insurance policy comprises six kinds of coverage. Most countries require
you to buy some, but not all, of these coverages. If you're financing a car, your
lender may also have requirements. Most auto policies are for six months to a
year.
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In theUnited States, your insurance company should notify you by mail when its
time to renew the policy and to pay your premium
Home insurance
Home insurance provides compensation for damage or destruction of a home
from disasters. In some geographical areas, the standard insurances excludes
certain types of disasters, such as flood and earthquakes, that require additional
coverage. Maintenance-related problems are the homeowners' responsibility.
The policy may include inventory, or this can be bought as a separate policy,
especially for people who rent housing. In some countries, insurers offer a
package which may include liability and legal responsibility for injuries and
property damage caused by members of the household, including pets.[11]
Health
Health insurance policies by the National Health Service in the United Kingdom
(NHS) or other publicly-funded health programs will cover the cost of medical
treatments. Dental insurance, like medical insurance, is coverage for individuals
to protect them against dental costs. In the U.S., dental insurance is often part of
an employer's benefits package, along with health insurance.
Disability
Disability insurance policies provide financial support in the event the
policyholder is unable to work because of disabling illness or injury. It
provides monthly support to help pay such obligations as mortgagesand
credit cards.
Disability overhead insurance allows business owners to cover the
overhead expenses of their business while they are unable to work.
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Total permanent disability insurance provides benefits when a person is
permanently disabled and can no longer work in their profession, often
taken as an adjunct to life insurance.
Workers' compensation insurance replaces all or part of a worker's wages
lost and accompanying medical expenses incurred because of a job-
related injury.
Casualty
Casualty insurance insures against accidents, not necessarily tied to any specific
property.
Crime insurance is a form of casualty insurance that covers the
policyholder against losses arising from the criminal acts of third parties.
For example, a company can obtain crime insurance to cover losses
arising from theft orembezzlement.
Political risk insurance is a form of casualty insurance that can be taken
out by businesses with operations in countries in which there is a risk that
revolution or otherpolitical conditions will result in a loss.
Life
Life insurance provides a monetary benefit to a decedent's family or other
designated beneficiary, and may specifically provide for income to an insured
person's family, burial, funeral and other final expenses. Life insurance policies
often allow the option of having the proceeds paid to the beneficiary either in a
lump sum cash payment or an annuity.
Annuities provide a stream of payments and are generally classified as insurance
because they are issued by insurance companies and regulated as insurance
and require the same kinds of actuarial and investment management expertise
that life insurance requires. Annuities and pensions that pay a benefit for life are
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sometimes regarded as insurance against the possibility that a retiree will outlive
his or her financial resources. In that sense, they are the complement of life
insurance and, from an underwriting perspective, are the mirror image of life
insurance.
Certain life insurance contracts accumulate cash values, which may be taken by
the insured if the policy is surrendered or which may be borrowed against. Some
policies, such as annuities and endowment policies, are financial instruments to
accumulate orliquidatewealth when it is needed.
In many countries, such as the U.S. and the UK, the tax law provides that the
interest on this cash value is not taxable under certain circumstances. This leads
to widespread use of life insurance as a tax-efficient method ofsaving as well as
protection in the event of early death.
In U.S., the tax on interest income on life insurance policies and annuities is
generally deferred. However, in some cases the benefit derived from tax deferral
may be offset by a low return. This depends upon the insuring company, the type
of policy and other variables (mortality, market return, etc.). Moreover, other
income tax saving vehicles (e.g., IRAs, 401(k) plans, Roth IRAs) may be better
alternatives for value accumulation. A combination of low-cost term life insurance
and a higher-return tax-efficient retirement account may achieve better
investment return.
Property
This tornado damage to an Illinois home would be considered an "Act of God" for
insurance purposes
Property insurance provides protection against risks to property, such as fire,
theft orweatherdamage. This includes specialized forms of insurance such as
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fire insurance, flood insurance, earthquake insurance, home insurance, inland
marine insurance orboiler insurance.
Automobile insurance, known in the UK as motor insurance, is probablythe most common form of insurance and may cover both legal liability
claims against the driver and loss of or damage to the insured's vehicle
itself. Throughout the United States an auto insurance policy is required to
legally operate a motor vehicle on public roads. In some jurisdictions,
bodily injury compensation for automobile accident victims has been
changed to a no-fault system, which reduces or eliminates the ability to
sue for compensation but provides automatic eligibility for benefits. Credit
card companies insure against damage on rented cars.
o Driving School Insurance insurance provides cover for any
authorized driver whilst undergoing tuition, cover also unlike other
motor policies provides cover for instructor liability where both the
pupil and driving instructor are equally liable in the event of a claim.
Aviation insurance insures against hull, spares, deductibles, hull wear and
liability risks.
Boiler insurance (also known as boiler and machinery insurance or
equipment breakdown insurance) insures against accidental physical
damage to equipment or machinery.
Builder's risk insurance insures against the risk of physical loss or damage
to property during construction. Builder's risk insurance is typically written
on an "all risk" basis covering damage due to any cause (including the
negligence of the insured) not otherwise expressly excluded.
Crop insurance "Farmers use crop insurance to reduce or manage variousrisks associated with growing crops. Such risks include crop loss or
damage caused by weather, hail, drought, frost damage, insects, or
disease, for instance.
Earthquake insurance is a form of property insurance that pays the
policyholder in the event of an earthquake that causes damage to the
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property. Most ordinary homeowners insurance policies do not cover
earthquake damage. Most earthquake insurance policies feature a high
deductible. Rates depend on location and the probability of an earthquake,
as well as the construction of the home.
A fidelity bond is a form of casualty insurance that covers policyholders for
losses that they incur as a result of fraudulent acts by specified
individuals. It usually insures a business for losses caused by the
dishonest acts of its employees.
Flood insurance protects against property loss due to flooding. Many
insurers in the U.S. do not provide flood insurance in some portions of the
country. In response to this, the federal government created the NationalFlood Insurance Program which serves as the insurer of last resort.
Home insurance or homeowners' insurance: See "Property insurance".
Landlord insurance is specifically designed for people who own properties
which they rent out. Most house insurance cover in the U.K will not be
valid if the property is rented out therefore landlords must take out this
specialist form of home insurance.
Marine insurance and marine cargo insurance cover the loss or damage of
ships at sea or on inland waterways, and of the cargo that may be on
them. When the owner of the cargo and the carrier are separate
corporations, marine cargo insurance typically compensates the owner of
cargo for losses sustained from fire, shipwreck, etc., but excludes losses
that can be recovered from the carrier or the carrier's insurance. Many
marine insurance underwriters will include "time element" coverage in
such policies, which extends the indemnity to cover loss of profit and other
business expenses attributable to the delay caused by a covered loss.
Surety bond insurance is a three party insurance guaranteeing the
performance of the principal.
Terrorism insurance provides protection against any loss or damage
caused by terrorist activities.
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Volcano insurance is an insurance that covers volcano damage in Hawaii.
Windstorm insurance is an insurance covering the damage that can be
caused by hurricanes and tropical cyclones.
Liability
Liability insurance is a very broad superset that covers legal claims against the
insured. Many types of insurance include an aspect of liability coverage. For
example, a homeowner's insurance policy will normally include liability coverage
which protects the insured in the event of a claim brought by someone who slips
and falls on the property; automobile insurance also includes an aspect of liability
insurance that indemnifies against the harm that a crashing car can cause to
others' lives, health, or property. The protection offered by a liability insurance
policy is twofold: a legal defense in the event of a lawsuit commenced against the
policyholder and indemnification (payment on behalf of the insured) with respect
to a settlement or court verdict. Liability policies typically cover only the
negligence of the insured, and will not apply to results of wilful or intentional acts
by the insured.
Directors and officers liability insurance protects an organization (usually a
corporation) from costs associated with litigation resulting from mistakes
made by directors and officers for which they are liable. In the industry, it
is usually called "D&O" for short.
Environmental liability insurance protects the insured from bodily injury,
property damage and cleanup costs as a result of the dispersal, release or
escape of pollutants.
Errors and omissions insurance: See "Professional liability insurance"
under "Liability insurance".
Prize indemnity insurance protects the insured from giving away a large
prize at a specific event. Examples would include offering prizes to
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contestants who can make a half-court shot at a basketball game, or a
hole-in-one at a golf tournament.
Professional liability insurance, also called professional indemnity
insurance, protects insured professionals such as architectural corporation
and medical practice against potential negligence claims made by their
patients/clients. Professional liability insurance may take on different
names depending on the profession. For example, professional liability
insurance in reference to the medical profession may be called
malpractice insurance. Notaries public may take out errors and omissions
insurance (E&O). Other potential E&O policyholders include, for example,
real estate brokers, Insurance agents, home inspectors, appraisers, andwebsite developers.
Credit
Credit insurance repays some or all of a loan when certain things happen to the
borrower such as unemployment, disability, ordeath.
Mortgage insurance insures the lender against default by the borrower.
Mortgage insurance is a form of credit insurance, although the name credit
insurance more often is used to refer to policies that cover other kinds of
debt.
Other types
Collateral protection insurance or CPI, insures property (primarily vehicles)
held as collateral for loans made by lending institutions.
Defense Base Act Workers' compensation or DBA Insurance provides
coverage for civilian workers hired by the government to perform contracts
outside the U.S. and Canada. DBA is required for all U.S. citizens, U.S.
residents, U.S. Green Card holders, and all employees or subcontractors
hired on overseas government contracts. Depending on the country,
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Foreign Nationals must also be covered under DBA. This coverage
typically includes expenses related to medical treatment and loss of
wages, as well as disability and death benefits.
Expatriate insurance provides individuals and organizations operating
outside of their home country with protection for automobiles, property,
health, liability and business pursuits.
Financial loss insurance protects individuals and companies against
various financial risks. For example, a business might purchase coverage
to protect it from loss of sales if a fire in a factory prevented it from
carrying out its business for a time. Insurance might also cover the failure
of a creditorto pay money it owes to the insured. This type of insurance isfrequently referred to as "business interruption insurance." Fidelity bonds
and surety bonds are included in this category, although these products
provide a benefit to a third party (the "obligee") in the event the insured
party (usually referred to as the "obligor") fails to perform its obligations
under a contract with the obligee.
Kidnap and ransom insurance
Locked funds insurance is a little-known hybrid insurance policy jointly
issued by governments and banks. It is used to protect public funds from
tamper by unauthorized parties. In special cases, a government may
authorize its use in protecting semi-private funds which are liable to
tamper. The terms of this type of insurance are usually very strict.
Therefore it is used only in extreme cases where maximum security of
funds is required.
Nuclear incident insurance covers damages resulting from an incident
involving radioactive materials and is generally arranged at the national
level. See the Nuclear exclusion clause and for the United States the
Price-Anderson Nuclear Industries Indemnity Act)
Pet insurance insures pets against accidents and illnesses - some
companies cover routine/wellness care and burial, as well.
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Pollution Insurance, which consists of first-party coverage for
contamination of insured property either by external or on-site sources.
Coverage for liability to third parties arising from contamination of air,
water, or land due to the sudden and accidental release of hazardous
materials from the insured site. The policy usually covers the costs of
cleanup and may include coverage for releases from underground storage
tanks. Intentional acts are specifically excluded.
Purchase insurance is aimed at providing protection on the products
people purchase. Purchase insurance can cover individual purchase
protection, warranties, guarantees, care plans and even mobile phone
insurance. Such insurance is normally very limited in the scope ofproblems that are covered by the policy.
Title insurance provides a guarantee that title to real property is vested in
the purchaser and/ormortgagee, free and clear ofliens or encumbrances.
It is usually issued in conjunction with a search of the public records
performed at the time of a real estate transaction.
Travel insurance is an insurance cover taken by those who travel abroad, which
covers certain losses such as medical expenses, loss of personal belongings,
travel delay, personal liabilities, etc.
MAJOR PLAYERS IN INSURANCE SECTOR
LIFE INSURANCE
BUSINESS
NON-LIFE INSURANCE BUSINESS
Life Insurance Corporation
ICICI Prudential Life Insurance
General Insurance Corporation
National Insurance Company
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HDFC Standard Life Insurance
Max New York Life Insurance
Birla Sun Life Insurance
OM Kotak Mahindra Life Insurance
Reliance Life Insurance
Allianz Bajaj Life Insurance
Dabur CGU Life Insurance
ING Vyasa Life Insurance
SBI Life Insurance
PNB Life Insurance
BOB Life Insurance
The New India Assurance Company
The Oriental Insurance Company
United India Insurance Company
Reliance General Insurance
TATA-AIG Insurance
Royal Sundaram Alliance General Ins.
Bajaj Allianz General Insurance
ICICI Lombard Insurance
Insurance financing vehicles
Fraternal insurance is provided on a cooperative basis by fraternal benefit
societies or other social organizations.[13]
No-fault insurance is a type of insurance policy (typically automobile
insurance) where insureds are indemnified by their own insurer regardless
of fault in the incident.
Protected Self-Insurance is an alternative risk financing mechanism in
which an organization retains the mathematically calculated cost of risk
within the organization and transfers the catastrophic risk with specific and
aggregate limits to an insurer so the maximum total cost of the program is
known. A properly designed and underwritten Protected Self-Insurance
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Program reduces and stabilizes the cost of insurance and provides
valuable risk management information.
Retrospectively Rated Insurance is a method of establishing a premium on
large commercial accounts. The final premium is based on the insured's
actual loss experience during the policy term, sometimes subject to a
minimum and maximum premium, with the final premium determined by a
formula. Under this plan, the current year's premium is based partially (or
wholly) on the current year's losses, although the premium adjustments
may take months or years beyond the current year's expiration date. The
rating formula is guaranteed in the insurance contract. Formula:
retrospective premium = converted loss + basic premium tax multiplier.Numerous variations of this formula have been developed and are in use.
Formal self insurance is the deliberate decision to pay for otherwise
insurable losses out of one's own money. This can be done on a formal
basis by establishing a separate fund into which funds are deposited on a
periodic basis, or by simply forgoing the purchase of available insurance
and paying out-of-pocket. Self insurance is usually used to pay for high-
frequency, low-severity losses. Such losses, if covered by conventional
insurance, mean having to pay a premium that includes loadings for the
company's general expenses, cost of putting the policy on the books,
acquisition expenses, premium taxes, and contingencies. While this is true
for all insurance, for small, frequent losses the transaction costs may
exceed the benefit of volatility reduction that insurance otherwise affords.
Reinsurance is a type of insurance purchased by insurance companies or
self-insured employers to protect against unexpected losses. Financial
reinsurance is a form of reinsurance that is primarily used for capital
management rather than to transfer insurance risk.
Social insurance can be many things to many people in many countries.
But a summary of its essence is that it is a collection of insurance
coverages (including components of life insurance, disability income
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insurance, unemployment insurance, health insurance, and others), plus
retirement savings, that requires participation by all citizens. By forcing
everyone in society to be a policyholder and pay premiums, it ensures that
everyone can become a claimant when or if he/she needs to. Along the
way this inevitably becomes related to other concepts such as the justice
system and the welfare state. This is a large, complicated topic that
engenders tremendous debate, which can be further studied in the
following articles (and others):
o National Insurance
o Social safety net
o Social securityo Social Security debate (United States)
o Social Security (United States)
o Social welfare provision
Stop-loss insurance provides protection against catastrophic or
unpredictable losses. It is purchased by organizations who do not want to
assume 100% of the liability for losses arising from the plans. Under a
stop-loss policy, the insurance company becomes liable for losses that
exceed certain limits called deductibles.
Closed community self-insurance
Some communities prefer to create virtual insurance amongst themselves by
other means than contractual risk transfer, which assigns explicit numerical
values to risk. A number of religious groups, including the Amish and some
Muslim groups, depend on support provided by theircommunities whendisastersstrike. The risk presented by any given person is assumed collectively by the
community who all bear the cost of rebuilding lost property and supporting people
whose needs are suddenly greater after a loss of some kind. In supportive
communities where others can be trusted to follow community leaders, this tacit
form of insurance can work. In this manner the community can even out the
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extreme differences in insurability that exist among its members. Some further
justification is also provided by invoking the moral hazard of explicit insurance
contracts.
In the United Kingdom, The Crown (which, for practical purposes, meant the Civil
service) did not insure property such as government buildings. If a government
building was damaged, the cost of repair would be met from public funds
because, in the long run, this was cheaper than paying insurance premiums.
Since many UK government buildings have been sold to property companies,
and rented back, this arrangement is now less common and may have
disappeared altogether.
Insurance companies
Insurance companies may be classified into two groups:
Life insurance companies, which sell life insurance, annuities and
pensions products.
Non-life, General, or Property/Casualty insurance companies, which sell
other types of insurance.
General insurance companies can be further divided into these sub categories.
Standard Lines
Excess Lines
In most countries, life and non-life insurers are subject to different regulatory
regimes and different tax and accounting rules. The main reason for the
distinction between the two types of company is that life, annuity, and pension
business is very long-term in nature coverage for life assurance or a pension
can cover risks over many decades. By contrast, non-life insurance cover usually
covers a shorter period, such as one year.
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In the United States, standard line insurance companies are "mainstream"
insurers. These are the companies that typically insure autos, homes or
businesses. They use pattern or "cookie-cutter" policies without variation from
one person to the next. They usually have lower premiums than excess lines and
can sell directly to individuals. They are regulated by state laws that can restrict
the amount they can charge for insurance policies.
Excess line insurance companies (aka Excess and Surplus) typically insure risks
not covered by the standard lines market. They are broadly referred as being all
insurance placed with non-admitted insurers. Non-admitted insurers are not
licensed in the states where the risks are located. These companies have more
flexibility and can react faster than standard insurance companies because they
are not required to file rates and forms as the "admitted" carriers do. However,
they still have substantial regulatory requirements placed upon them. State laws
generally require insurance placed with surplus line agents and brokers not to be
available through standard licensed insurers.
Insurance companies are generally classified as either mutual or stock
companies. Mutual companies are owned by the policyholders, whilestockholders (who may or may not own policies) own stock insurance
companies. Demutualization of mutual insurers to form stock companies, as well
as the formation of a hybrid known as a mutual holding company, became
common in some countries, such as the United States, in the late 20th century.
Other possible forms for an insurance company include reciprocals, in which
policyholders 'reciprocate' in sharing risks, and Lloyds organizations.
Insurance companies are rated by various agencies such as A. M. Best. The
ratings include the company's financial strength, which measures its ability to pay
claims. It also rates financial instruments issued by the insurance company, such
as bonds, notes, and securitization products.
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Reinsurance companies are insurance companies that sell policies to other
insurance companies, allowing them to reduce their risks and protect themselves
from very large losses. The reinsurance market is dominated by a few very large
companies, with huge reserves. A reinsurer may also be a direct writer of
insurance risks as well.
Captive insurance companies may be defined as limited-purpose insurance
companies established with the specific objective of financing risks emanating
from their parent group or groups. This definition can sometimes be extended to
include some of the risks of the parent company's customers. In short, it is an in-
house self-insurance vehicle. Captives may take the form of a "pure" entity
(which is a 100% subsidiary of the self-insured parent company); of a "mutual"
captive (which insures the collective risks of members of an industry); and of an
"association" captive (which self-insures individual risks of the members of a
professional, commercial or industrial association). Captives represent
commercial, economic and tax advantages to their sponsors because of the
reductions in costs they help create and for the ease of insurance risk
management and the flexibility for cash flows they generate. Additionally, they
may provide coverage of risks which is neither available nor offered in the
traditional insurance market at reasonable prices.
The types of risk that a captive can underwrite for their parents include property
damage, public and product liability, professional indemnity, employee benefits,
employers' liability, motor and medical aid expenses. The captive's exposure to
such risks may be limited by the use of reinsurance.
Captives are becoming an increasingly important component of the risk
management and risk financing strategy of their parent. This can be understood
against the following background:
heavy and increasing premium costs in almost every line of coverage;
difficulties in insuring certain types of fortuitous risk;
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differential coverage standards in various parts of the world;
rating structures which reflect market trends rather than individual loss
experience;
insufficient credit for deductibles and/or loss control efforts.
There are also companies known as 'insurance consultants'. Like a mortgage
broker, these companies are paid a fee by the customer to shop around for the
best insurance policy amongst many companies. Similar to an insurance
consultant, an 'insurance broker' also shops around for the best insurance policy
amongst many companies. However, with insurance brokers, the fee is usually
paid in the form of commission from the insurer that is selected rather than
directly from the client.
Neither insurance consultants nor insurance brokers are insurance companies
and no risks are transferred to them in insurance transactions. Third party
administrators are companies that perform underwriting and sometimes claims
handling services for insurance companies. These companies often have special
expertise that the insurance companies do not have.
The financial stability and strength of an insurance company should be a major
consideration when buying an insurance contract. An insurance premium paid
currently provides coverage for losses that might arise many years in the future.
For that reason, the viability of the insurance carrier is very important. In recent
years, a number of insurance companies have become insolvent, leaving their
policyholders with no coverage (or coverage only from a government-backed
insurance pool or other arrangement with less attractive payouts for losses). A
number of independent rating agencies, such as Best's, Fitch, Standard & Poor's,
and Moody's Investors Service, provide information and rate the financial viability
of insurance companies.
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Global insurance industry
Life insurance premia written in 2005
Non-life insurance premia written in 2005
Global insurance premiums grew by 11% in 2007 (or 3.3% in real terms) to reach
$4.1 trillion. The macro-economic environment was characterised by slower
economic growth in 2007 and rising inflation. Profitability improved in life
insurance and fell slighlty in the non-life sector during the year. Life insurance
premiums grew by 12.6%, accelerating in the advanced economies with the
exception of Japan and Continental Europe. Non-life insurance premiums grew
by 7.6% during the year. Figures for premium income are not yet available for
2008, but the insurance industry is likely to see a slowdown in new business and
falling investment revenue.
Advanced economies account for the bulk of global insurance. With premium
income of $1,681bn, Europe was the most important region, followed by North
America ($1,330bn) and Asia ($814bn). The top four countries accounted for
nearly 60% of premiums in 2007. The US and UK alone accounted for 42% of
world insurance, much higher than their 7% share of the global population.
Emerging markets accounted for over 85% of the worlds population but
generated only around 10% of premiums.
Complexity of insurance policy contracts
Insurance policies can be complex and some policyholders may not understand
all the fees and coverages included in a policy. As a result, people may buypolicies on unfavorable terms. In response to these issues, many countries have
enacted detailed statutory and regulatory regimes governing every aspect of the
insurance business, including minimum standards for policies and the ways in
which they may be advertised and sold.
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For example, most insurance policies in the English language today have been
carefully drafted in plain English; the industry learned the hard way that many
courts will not enforce policies against insureds when the judges themselves
cannot understand what the policies are saying.
Many institutional insurance purchasers buy insurance through an insurance
broker. While on the surface it appears the broker represents the buyer (not the
insurance company), and typically counsels the buyer on appropriate coverage
and policy limitations, it should be noted that in the vast majority of cases a
broker's compensation comes in the form of a commission as a percentage of the
insurance premium, creating a conflict of interest in that the broker's financial
interest is tilted towards encouraging an insured to purchase more insurance
than might be necessary at a higher price. A broker generally holds contracts
with many insurers, thereby allowing the broker to "shop" the market for the best
rates and coverage possible. Insurance may also be purchased through an
agent. Unlike a broker, who represents the policyholder, an agent represents the
insurance company from whom the policyholder buys. An agent can represent
more than one company. An independent insurance consultant advises insureds
on a fee-for-service retainer, similar to an attorney, and thus offers completely
independent advice, free of the financial conflict of interest of brokers and/or
agents. However, such a consultant must still work through brokers and/or
agents in order to secure coverage for their clients.
Redlining
Redlining is the practice of denying insurance coverage in specific geographic
areas, supposedly because of a high likelihood of loss, while the alleged
motivation is unlawful discrimination. Racial profiling or redlining has a long
history in the property insurance industry in the United States. From a review of
industry underwriting and marketing materials, court documents, and research by
government agencies, industry and community groups, and academics, it is clear
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that race has long affected and continues to affect the policies and practices of
the insurance industry.
All states have provisions in their rate regulation laws or in their fair trade practiceacts that prohibit unfair discrimination, often called redlining, in setting rates and
making insurance available.
In determining premiums and premium rate structures, insurers consider
quantifiable factors, including location, credit scores, gender, occupation,marital
status, and education level. However, the use of such factors is often considered
to be unfair or unlawfully discriminatory, and the reaction against this practice
has in some instances led to political disputes about the ways in which insurers
determine premiums and regulatory intervention to limit the factors used.
An insurance underwriter's job is to evaluate a given risk as to the likelihood that
a loss will occur. Any factor that causes a greater likelihood of loss should
theoretically be charged a higher rate. This basic principle of insurance must be
followed if insurance companies are to remain solvent. Thus, "discrimination"
against (i.e., negative differential treatment of) potential insureds in the risk
evaluation and premium-setting process is a necessary by-product of the
fundamentals of insurance underwriting. For instance, insurers charge older
people significantly higher premiums than they charge younger people for term
life insurance. Older people are thus treated differently than younger people (i.e.,
a distinction is made, discrimination occurs). The rationale for the differential
treatment goes to the heart of the risk a life insurer takes: Old people are likely to
die sooner than young people, so the risk of loss (the insured's death) is greater
in any given period of time and therefore the risk premium must be higher to
cover the greater risk. However, treating insureds differently when there is no
actuarially sound reason for doing so is unlawful discrimination.
What is often missing from the debate is that prohibiting the use of legitimate,
actuarially sound factors means that an insufficient amount is being charged for a
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given risk, and there is thus a deficit in the system. The failure to address the
deficit may mean insolvency and hardship for all of a company's insureds. The
options for addressing the deficit seem to be the following: Charge the deficit to
the other policyholders or charge it to the government (i.e., externalize outside of
the company to society at large).
Insurance patents
New assurance products can now be protected from copying with a business
method patent in the United States.
A recent example of a new insurance product that is patented is Usage Basedauto insurance. Early versions were independently invented and patented by a
major U.S. auto insurance company, Progressive Auto Insurance (U.S. Patent
5,797,134) and a Spanish independent inventor, Salvador Minguijon Perez
(EP patent 0700009).
Many independent inventors are in favor of patenting new insurance products
since it gives them protection from big companies when they bring their new
insurance products to market. Independent inventors account for 70% of the new
U.S. patent applications in this area.
Many insurance executives are opposed to patenting insurance products
because it creates a new risk for them. The Hartford insurance company, for
example, recently had to pay $80 million to an independent inventor, Bancorp
Services, in order to settle a patent infringement and theft of trade secret lawsuit
for a type of corporate owned life insurance product invented and patented by
Bancorp.
There are currently about 150 new patent applications on insurance inventions
filed per year in the United States. The rate at which patents have issued has
steadily risen from 15 in 2002 to 44 in 2006. Inventors can now have their
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insurance U.S. patent applications reviewed by the public in the Peer to Patent
program. The first insurance patent application to be posted was US2009005522
Risk assessment company. It was posted on March 6, 2009. This patent
application describes a method for increasing the ease of changing insurance
companies
The insurance industry and rent seeking
Certain insurance products and practices have been described as rent seeking
by critics. That is, some insurance products or practices are useful primarily
because of legal benefits, such as reducing taxes, as opposed to providing
protection against risks of adverse events. Under United States tax law, for
example, most owners ofvariable annuities and variable life insurance can invest
their premi
LIFE INSURANCE
Life insurance is the only tool to secure out life in future. It also provides a safe
guard to the uncertainty of our life. Life insurance is the cheapest investment tool
in which we can earn more in a short period of time.
In the words of D S Hansell Insurance may be defined as a social device
providing financial compensation for the effects of misfortune, the payment being
made from the accumulated contributions of all the parties participating in the
scheme.
The function of insurance is to protect you against losses you cant afford.
Insurance reduces anxiety over a possible loss and absorbs the financial brunt of
its consequences.
India has traditionally been a high savings oriented country being on par with the
thrifty Japan. Insurance sector in the United States of America is as big in size as
the banking industry there. This gives us an ideal of how important the sector is.
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Insurance sector changeless the savings of the people to long- term investments.
In India where infrastructure is said to be of critical importance, this sector will
bring the nations own money for the nation.
The global life insurance market stands at $ 1,521.2 billion while the
non-life insurance market is placed at $922.4 billion.
India takes the 23rd position with US $ 9.933 billion annual premium
collections and a meager 0.41% share.
Out of the billion people is India; only 35 million people are covered by insurance.
Indian insurance market is set to touch $25 billion by 2010, on the
assumption of a 7 per cent real annual growth in GDP.
In 3 years time we would expect the 10% of the population to be under some sort
of an insurance cover. This assuming a premium of Rs. 5000 on an average,
amounts to 100 million x Rs. 5000= Rs. 500 bn.
This has made the sector the hottest one in India after IT. With social security
and security to the people at large being the agenda for opening the sector, the
role of the regulator becomes all the more serious and one that would be
carefully watched at every step.
ABOUT LIFE INSURANCE:
The life insurance corporation was established on 01.09.1956 and has been the
sole corporation to write the life insurance business in India.
The Indian insurance industry saw a new sun when the Insurance regulatory &
Development Authority (IRDA) invited the applications for registration as insurers
in August, 2000. With the liberalization and opening up of the sector to private
players, the industry has presented promising prospects for the coming future.
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The transition has also resulted into introduction complete opportunities for the
professionals.
Life insurance orlife assurance is a contract between the policy owner and theinsurer, where the insurer agrees to pay a sum of money upon the occurrence of
the insured individual's or individuals' death or other event, such as terminal
illness or critical illness. In return, the policy owner agrees to pay a stipulated
amount called a premium at regular intervals or in lump sums. There may be
designs in some countries where bills and death expenses plus catering for after
funeral expenses should be included in Policy Premium. In the United States, the
predominant form simply specifies a lump sum to be paid on the insured's
demise.
As with most insurance policies, life insurance is a contract between the insurer
and the policy owner whereby a benefit is paid to the designated beneficiaries if
an insured event occurs which is covered by the policy.
The value for the policyholder is derived, not from an actual claim event, rather it
is the value derived from the 'peace of mind' experienced by the policyholder,
due to the negating of adverse financial consequences caused by the death of
the Life Assured.
To be a life policy the insured event must be based upon the lives of the people
named in the policy.
Insured events th